• 3 minutes e-car sales collapse
  • 6 minutes America Is Exceptional in Its Political Divide
  • 11 minutes Perovskites, a ‘dirt cheap’ alternative to silicon, just got a lot more efficient
  • 7 days They pay YOU to TAKE Natural Gas
  • 3 days How Far Have We Really Gotten With Alternative Energy
  • 6 days Why does this keep coming up? (The Renewable Energy Land Rush Could Threaten Food Security)
  • 1 day A question...
  • 12 days The United States produced more crude oil than any nation, at any time.
  • 3 days What fool thought this was a good idea...
Easing Inflation Sparks Bullish Sentiment in Oil Markets

Easing Inflation Sparks Bullish Sentiment in Oil Markets

Easing Inflation Sparks Bullish Sentiment…

7 Global Economic Myths Shattered

7 Global Economic Myths Shattered

There are many myths about…

Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

More Info

Premium Content

Fossil Fuels Aren’t Going Anywhere


“There is no scenario where hydrocarbons disappear,” the chief executive of Baker Hughes, Lorenzo Simonelli, said during his keynote speech at this year’s annual meeting in the company. Like other executives from the industry, Simonelli acknowledged and welcomed the energy transition, but he noted that a 100-percent renewable energy scenario was simply not possible. There is plenty of evidence this is indeed the case, despite the hopes and ambitions of many environmental advocates.

These hopes and ambitions imagine a world where human activity is powered from electricity only, and this electricity in turn is being generated using only renewable energy sources such as solar, wind, and hydropower.

Such a world, however, is unrealistic.

Take Germany, for example. The country, which is among the EU members with the most renewable energy capacity, produced very little solar energy since the start of this year. The reason: it’s winter. It is producing solid amounts of wind power, that’s for sure, but it is also generating power from the most despised fossil fuel of all: coal.

At the time of writing its carbon intensity was 264 grams of CO2 equivalent per kWh. That was comparable to the carbon intensity of another poster girl for renewables in Europe, Denmark, which is currently getting most of its energy from wind power.

So, it seems building renewable capacity in itself is not a silver bullet solution to the emissions problem. In fact, if you build it too quickly without adding substantial storage capacity, it could backfire. This was most recently evidenced by a narrow miss of a major blackout in Europe prompted by a minor problem at a Croatian substation that rippled through the continent, highlighting the importance of maintaining the grid at a constant frequency—something renewables cannot do because of their intermittent generation. Related: Canada Oil And Gas Deals Surge 468%
Even Denmark has thermal power plants to secure the baseload any grid needs to function properly and eliminate or at least reduce the risk of blackouts.

But back to Simonelli’s prediction about the guaranteed future of oil and gas. This future won’t be like the past. The world is firmly on course to change the way it generates and uses energy. Both Simonelli and the other keynote speaker at Baker Hughes’ AM2021, IHS Markit’s Daniel Yergin, recognized that. It is simply that this change will not be limited to a build-up of solar- and wind-generating capacity.

Energy efficiency, for one, will be a big part of the transition.

Efficiency has been pushed out of the spotlight recently, replaced by things like green hydrogen and the constant emission-reduction narrative, but it has not gone away. According to Baker Huges’ Simonelli, efficiency alone could help meet as much as 27 percent of the Paris Agreement climate change targets. On a global scale, this is a massive amount of emissions cut, at a rate of half a gigaton annually.

In addition to efficiency, there are all the commitments Big Oil is making under pressure from investors, regulators, and activists. Every supermajor now has a renewable energy transition plan, some more ambitious than others. All the plans, however, involve pouring billions of dollars into what is essentially a move away from these companies’ core business of extracting oil and gas from the ground, at a carbon and methane emission cost, of course.

Related: Rallying Oil Prices Are A Headache For Airlines

This shift to renewables might raise some doubts about whether oil and gas will really remain indispensable.  However, the facts suggest that they probably will. There are still millions of people around the world without access to any electricity, and going renewable straight out of the gate for many of these people is simply not an option, for a number of reasons including cost—yes, even though solar panel costs are dropping like WTI in April 2020—and logistics problems. Going green only appears cheaper than sticking with fossil fuels. But it isn’t.

As IHS Markit’s Yergin pointed out in his speech, emerging economies will continue to rely heavily on fossil fuels, despite other regions’ efforts to reduce their own reliance on them. Even if solar panels become free at some point, it is not just panels that go into the making of a solar farm: it also needs components such as inverters and a link to the grid, plus storage, for best results. This alone is enough to guarantee the long-term future of oil and especially gas as an indispensable part of the world’s energy mix.


So, if oil and gas are not going anywhere, can we at least make them a bit cleaner? We certainly can, according to both Simonelli and Yergin, as well as to many other industry experts. Carbon capture is the second element of oil and gas’ long game, besides efficiency. True, carbon capture technology is still quite costly but, as in solar and wind, costs are on their way down. From a lot of talk and little action, carbon capture is on its way to becoming a feature of the energy transition. Why? Because “the numbers don’t work without it,” as Daniel Yergen said.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:

Download The Free Oilprice App Today

Back to homepage

Leave a comment
  • Mark Battey on February 05 2021 said:
    Sea level is rising much faster than expected, and the temperatures are also increasing more quickly than forecast. People with coastal or desert interest will be making a lot of noise soon.
  • Mamdouh Salameh on February 06 2021 said:
    If I was writing this article, I would have chosen a title for it such as “Fossil Fuels are here to stay” rather than “Fossil Fuels Aren’t Going Anywhere”. Irina’s tile is misleading as it gives the wrong impression that fossil fuels have reached the end of the road whilst my suggested title indicates that they have indefinite time ahead of them.

    I can’t see a scenario now or ever where oil and natural gas are out of the global energy system. Oil and gas will continue to power the global economy well into the future.

    Moreover, there can neither be a post-oil era nor a peak oil demand throughout the 21st century and probably far beyond. This is so because a versatile and unique energy source like crude oil is irreplaceable. The global demand for both oil and gas will continue to grow in absolute terms as a result of expanding global economy and increasing world population but the rate of growth in percentage terms might decelerate very slightly as a result of a deeper penetration of EVs into the global transport system and a gradual global energy transition to renewables.

    Even a gradual energy transition can’t succeed without huge contributions from natural gas and nuclear power because of the intermittency of solar and wind generation. Germany is a case in point.

    And while energy efficiency can contribute significantly to the transition, there comes a point when energy efficiency can’t improve more.

    The world shouldn’t be fooled by the greenwashing drive of oil supermajors particularly European ones since this is wafer-thin. It is no more than a ploy to burnish their environmental credentials and justify the huge losses they have suffered in 2020, the drastic cuts they have made to dividends and making thousands of employees redundant. Their core business will always be the business that has sustained them for ages, namely oil and gas.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • Archy Region on February 06 2021 said:
    Simonelli acknowledged and welcomed the energy transition, but he noted that a 100-percent renewable energy scenario was simply not possible. Impossible! that is what they said about wind energy penetrating more than 20% share of the grid. The grid would become too unstable and besides it would be too expensive they said, it is simply not possible.

    However now there is a dozen countries around the world with more than 20% wind electricity. In the US half a dozen states have more than 20% wind electricity. One of them, Iowa, has twice as much as 20% (42%).

    The problem with Mr. Simonelli's prediction is that he did not factor in the impossible-makers of the world, such as Elon Revere Musk. And Elon is not the only one. An army of impossible-makers is closing on the citadel of fossil fuels.

    The best option if you cannot fight them is to join them. DONG proved it is possible by morphing into Orsted, an oil and gas caterpillar that stoped pumping oil and gas selling all its fossil fuel assets in the process. It took about a year (Nov 6 2016 to October 23 2017) and the caterpillar radically transformed its body, eventually emerging as a solar and wind butterfly. As a butterfly Orsted flew to great heights, tripling its capitalization in three years.
  • One Second on February 06 2021 said:
    Germany has produced a lot of watts from solar every day of this winter, but these watts just made up only a truly negligible amount of energy in the winter time. Could not let this slide, although the gist remains the same. With that out of the way, I have to say that I see an ongoing role for gas in the energy system of the future. But this gas will transition from being fossil natural gas to being methane that is synthesized via power to gas using renewable electricity. Long term oil won't play any role in the energy system. The switch from natural gas to renewable methane will not happen solely because of regulation, but because there will come a point when renewable methane will just be cheaper than natural gas. Yes, unbelievable now, I know, but looking at the cost curve of renewables and the cost curve of electrolysers and methanisation plants this is nonetheless inevitable. Those are just technologies that will get a lot cheaper all the time because of mass production like everything else. I really can't see this play out differently. 1 c/kWh pv seemed totally unbelievable 30 years ago too, and we all saw what happened.
  • yasser mcgarry on February 06 2021 said:
    what a fantastically uninformed article

    "Germany has not produced a single watt of solar power this year"

    Really? This is patently not the case and can be easily disproved by just by logging in to literally any solar inverter data logging system in that country.

    Stop presenting your opinions as statements of fact -just because you have not tried to obtain the correct information does not mean that it does not exist.
  • Heinz Meuller on February 08 2021 said:
    Yup and since president Bidens come in, he’s done wonders for the oil price, it’s really taken off. Jobs are coming back, salaries and day rates are going back to pre covid levels. Exciting times ahead. $75 and beyond will soon be the new norm.
  • Randall Hunt on February 10 2021 said:
    Irina is one of the few writers on this site who can give a rational view of world energy markets, most of the rest, especially Nick Cunningham, are just propagandists for renewables. Irina gives a balanced view of reality, not cheerleading for either side. Well done, Irina.
  • Universal Assignment on August 27 2022 said:
    Take professional expert help for Module title Electronics Design and Testing and many more. Best Assignment services in Australia, globally trusted, instant Support, Plag free solution, 100% safe, order now!

Leave a comment

EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News